Canadian Wildfires Curtail Oil Sands Production

EDMONTON, Alberta — The wildfires ravaging Fort McMurray, Alberta, have done something that the collapse of global oil prices could not do: curtail production in the Canadian oil sands.

While the total reduction has not been revealed, analysts say it is substantial. Several companies have announced that they are throttling back or, in one case, shutting down their oil sands operations in the area and pulling their employees out.

“At this point in time, we’re not focusing on production numbers,” said Chelsie Klassen, a spokeswoman for the Canadian Association of Petroleum Producers. “Our operators are just focusing on the evacuation right now. We do not know the impact.”

No one can say how long production will be curtailed, just as no one can say when the fire will burn out. But if output is low for an extended period, it may have a significant effect on Canada’s economy. The oil sands contribute 2.1 million barrels to Canada’s total daily production of 3.9 million barrels. Nearly all of it is sent to the United States.

Most of the oil sands operations are north of Fort McMurray and out of the direct path of the fire, which continued to move south of the city on Thursday, threatening the airport, forcing the evacuation of several small communities and showing no signs of abating.

But some operations are to the south, and one of them — the Long Lake project owned by Nexen, a unit of Cnooc, the Chinese oil company — was closed in the face of the advancing fire. The company did not offer any statistics for the lost production from Long Lake, which has been plagued by technical problems.

Production slowdowns north of the city, which is now cut off by road from the rest of Alberta, have been prompted by two factors: pipeline shutdowns because of the fire, and corporate decisions to evacuate all but the most essential employees far from the fires.

Will Gibson, a spokesman for Syncrude, which pioneered the oil sands, said the company had “reduced operations to a minimum” at its two projects and at facilities that turn the tar-like bitumen from the sands into synthetic crude oil. Syncrude’s main operation is about 20 miles north of Fort McMurray, the nearest to the city.

On Thursday, the company was evacuating about 1,500 employees by air.

Syncrude has the capacity to produce about 350,000 barrels of oil a day. Mr. Gibson said he did not have a figure for what minimum output would be.

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The Alberta fire department said it would be a couple more days before investigators would be able to determine whether the fire there was caused by people or lightning.Published OnMay 5, 2016CreditCreditCBC News, via Reuters

Suncor, the largest integrated oil company based in Canada, has also reduced output and was flying out employees. “It’s too soon to determine impact on production,” said Paul Newmarch, a spokesman.

Shell Canada shut down all but the bare minimum operations at its Albian Sands project, about 60 miles north of Fort McMurray. Husky Oil said it had reduced production from the oil sands by two-thirds, to 10,000 barrels a day.

In addition to oil workers, as many as 10,000 residents of Fort McMurray fled north from the fire, most of them taking shelter in the work camps normally used to house oil workers. An airstrip at Shell’s Albian Sands work camp was being used by the oil producers and the regional government to fly many of them out and to fly in food and supplies for those who remain.

Because the capital costs of oil sands operations are high, few of them chose to cut production when oil prices slumped, and complete shutdowns for price reasons were not considered. Restarting the large projects after a shutdown can take months and be hugely expensive.

Some very small demonstration projects have been closed, though, and several companies have delayed new projects or canceled expansion plans because of the market slump.